Measuring The Value Of Intangible Assets | A New Approach

Despite the rise of the intangible economy, much of the business world is failing to value intangible assets. The accounting profession has been grappling with this issue for the past 30 years and has made virtually no visible progress.

Many thought leaders have suggested new approaches to asset valuation, but traditional accounting methods are deeply ingrained and institutionalised. The incentives for sustaining this outdated system have meant that thought leaders are often viewed as heretics rather than helpers.

History books are filled with examples of paradigm shifts. Every shift follows the same basic structure. A dominant model is widely accepted by the majority of people. From time to time unexpected events challenge the assumptions of the dominant model, but are ignored for the sake of preserving the theory.

Individuals appear who question this model and suggest new, better alternatives, but initially their ideas are rejected or laughed down. Gradually, however, people adopt the new models and find better ways to solve the old problems.

As these better ways to solve problems spread, more and more individuals accept the new model. Eventually the new model is accepted, and the majority of people adopt it.

In 1847, Ignaz Semmelweis, a Hungarian physician, noticed a high maternal mortality rate from puerperal fever, following births assisted by doctors and medical students. Births assisted by midwives were much safer.

He realised that the doctors were often attending births immediately after performing autopsies, and theorised that perhaps puerperal fever was a contagious infection transmitted via contact with the doctor’s hands.

Semmelweis made the doctors wash their hands with chlorinated lime water before examining the women. The result was a 16.8% reduction in maternal mortality rates over the period of a year.

Semmelweis’ ideas were rejected by the contemporary medical establishment. Although various physicians over the ages had suggested that diseases might be transmitted by physical contact, this was not treated as medically accurate.

The prevailing theory of disease of the time, miasma theory, held that infection was transmitted by bad air. According to this theory, washing one’s hands before examining a patient could have no effect on the likelihood of that patient’s infection.

Semmelweis’ ideas, which seem so intuitive to us today, were at the time seen as radically unscientific, and heretical.

Semmelweis was not the first physician to recognise that disease could be transferred by other means than simply bad air. Throughout the ages it had been noted that disease could spread from infected individuals to healthy ones.

In 1762, the Austrian Physician Antonius von Plenciz, outlined an early theory of germ based infection. However, like Semmelweis, his theory was not accepted by the scientific community of his day.

It was not till the latter part of the 19th century that the germ theory finally found serious traction in the medical community. The work of Louis Pasteur in the 1860s and Robert Koch in the 1880s provided compelling evidence that disease could be caused by living organisms.

In the 1870s, Joseph Lister pioneered practical applications of the germ theory, developing techniques for reducing infection in medical procedures by using antiseptics and other sanitary techniques.

By the end of the 1880s, the miasma theory of disease was struggling to compete with the germ theory. Since then, the germ theory has been the standard theory of disease accepted by medical practitioners all over the world.